China’s emerging high-tech sector could pose a serious challenge to Asian competitors, including Taiwan, Standard & Poor's local partner Taiwan Ratings said.
According to the credit ratings agency, China has established its own supply chain for its high-tech sector to reduce reliance on imports, a challenge that other Asian mobile device and flat panel manufacturers must face and overcome.
Taiwan Ratings said that China's rapid growth in technology industry may not be good for the long-term prospects of high-tech firms in other countries in Asia, but its effects may only be felt in the next two years.
"We expect the growth of Chinese technology firms to increase pricing pressure for established competitors in Asia," Taiwan Ratings analyst Raymond Hsu said in the report.
"However, the impact on the credit profiles of individual companies will depend on the level of their product differentiation, technological strengths and business diversity," Hsu added.
The report said that in recent years, Chinese hardware brands have secured a higher market share after enhancing their visibility, while other Asian suppliers are looking to reinforce their own supply chains and lower external influences.
Hsu said that China is developing its own smartphone industry and Chinese brands benefit from low production costs and a huge local demand.
Hsu added that the market share of South Korea's Samsung and LG Electronics are likely to fall and their profitability gradually diminish amid China's more visible presence in the global smartphone market.
Taiwan Ratings, however, said that in the semiconductor industry, Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung may continue to lead over their Chinese counterparts over the next three to five years.
China's IC design firms are unlikely to challenge its Taiwanese rivals this early, since Chinese suppliers are still behind in technology in this sector, the agency added.